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What is the ending inventory budget? What are the three financial statements produced by the master budget? Why is the master budget prepared before the period begins? What is a pro forma cash flow statement in the master budget? What is a budgeted income statement used for? In what order are the components of the master budget prepared? How is the budgeted income statement prepared? How does the cash budget fit within the master budget? What is the cost of goods sold budget and how does it link inventory budgets? Why must the budgeted balance sheet balance, and what if it doesn't?
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What is the first budget prepared in the master budget and why?

Beginner

Answer

The sales budget is prepared first because sales demand is usually the principal budget factor—production, purchasing, staffing, and cash all depend on how much the business expects to sell. Everything else in the master budget is built from the sales plan.
Real-world example The sales budget of 10,000 units drives production, materials, and cash budgets that follow.

Common follow-ups: Why does sales come first? | What depends on it?

Types of Budgets The Budgeting Process The Master Budget
All 34 The Master Budget questions